Time Value of Annuity

Can someone please explain to me this formula in detail. I just can't figure how dividing by $r$ leads to converting the numerator to Future value of an annuity?

What I understand from the numerator is it basically removes the principal amount and keeps the interest from compounding a single cash flow after subtracting 1. Below is the formula:

FVAn = A $\frac {[(1+r)^n-1]}{r}$

Where, FVAn = Future Value of an Annuity A = Annuity
r = Rate of Interest
n = number of years

#QuantitativeFinance

Easy Math Editor

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Comments

Did you look at the time value of money? It lists out the present value of an annuity.

Calvin Lin Staff - 4 years, 7 months ago

Math	Appears as
Remember to wrap math in `\(` ... `\)` or `\[` ... `\]` to ensure proper formatting.
`2 \times 3`	$2 \times 3$
`2^{34}`	$2^{34}$
`a_{i-1}`	$a_{i-1}$
`\frac{2}{3}`	$\frac{2}{3}$
`\sqrt{2}`	$\sqrt{2}$
`\sum_{i=1}^3`	$\sum_{i=1}^3$
`\sin \theta`	$\sin \theta$
`\boxed{123}`	$\boxed{123}$